Wednesday, December 01, 2010

Book review: The New Korea

When a country can will and work itself out of post-war poverty to become the world’s 15th largest economy, re-invent its closed-door chaebols (conglomerates) to breed competitive multi-national corporations and have its national car brand go from laughing stock to win the coveted 2009 “North American Car of the Year” award, it is time to sit up and notice.

In their book, The New Korea: An Inside Look at South Korea’s Economic Rise, former journalists Myung Oak Kim and Sam Jaffe examined the nuts and bolts of a nation way advanced in technology adoption, strong in its determination to succeed, yet also fiercely nationalistic and wary of Western influences.

What has transpired is a five-part look into the country’s history, economics, trade, industries, society and the parts they play in Korea’s future. Crisp summaries of broad trends are interjected with anecdotal accounts of historical trail-blazers, life stories of ordinary Koreans and its immigrant population, which adds an interesting and personal touch to what might otherwise have been a staid analysis of the global economic powerhouse.

New Koreagives a broad understanding of what the authors call a “prosperous yet often perplexing nation”, exploring questions like: Can Korea compete with low-wage countries like China and India? Will it go on the path of safe, zero economic growth like Japan? Will its closed social structures and government involvement in every technological development hamper its progress towards dynamic growth?

Sharing a painful history

The key to a country’s present is to understand its past. “History is as much a part of the present as it was of the past,” wrote the husband and wife team of Jaffe and Myung. “History, to a Korean, is not what happened. It is who you are, and what you do, why you do it.”

A large part of who Koreans are is defined by a “pain sharing” spirit, which, despite its negative feel, has proven to be an asset. This collective mindset led the people to donate their gold to help pay foreign debt in the 1997 Asian Financial Crisis, and also, to respond to the call for wage freezes, concessions and job-sharing measures in the recent global economic downturn of 2008. They would even roll up their sleeves and turn up in droves to clear up an oil spill voluntarily.

On the other hand, two thousand years of hostilities between the former Silla, Baekje and Goguryeo kingdoms that made up the Korean peninsula has resulted in social prejudice that still exist amongst people in these provinces today. More recently, the Korean War (1950-1953) which killed millions and left many more displaced, has created the deep rift between the capitalist South and the communist North that shows no signs of ending. Germany, the most prominent divided country as a result of the Cold War, in contrast, is celebrating its 20th anniversary of reunification this year.

This divide hovers overhead the Korean peninsula like a dark cloud till today. According to the authors, “All of them have scars that they have passed on to their children and grandchildren.” However, if there is something that the North and South have in common, it is pride in their history of self-reliance that has come about following repeated invasions from the Chinese, Japanese and Mongolian forces throughout history – attempts that can perhaps explain why the country resists opening itself up to foreign influences and elements.

Uzbek bar girls, Nigerian dockworkers

But the homogenous face of Korean society is changing. The authors observe that while foreigners used to come to Korea as “tourists or conquerors”, they are now coming in droves from around the world, seeking job opportunities. Foreign-born residents now number more than one million and account for more than 2% of the country’s population. They range from the Western English teachers to Chinese- and Japanese-Koreans who come for marriage or jobs. Then there are the labourers like “Filipino factory workers, Uzbek bar girls and Nigerian dockworkers”, that work in “3D jobs” or work perceived by the locals to be “dirty, dangerous and demeaning”.

The foreign influx is an upward trend, said the authors. “The flow of foreigners into the country is expected to increase as the country ages and the native workforce shrinks.” Even the chaebols – life-long employers (just like companies in Japan) – are looking outside the country for their top executives. LG Electronics, for example, has recruited several into its top executive ranks; Samsung, the largest chaebol, also went on a “foreign hiring spree” for its executives in 2008.

Gender imbalance adds to the equation. Korean men look to Vietnam and China to find brides as many young women move from farms to cities for a better life; and in the cities, fewer women are marrying.

While Korea seems to be adopting a more open attitude these days, practical inconveniences for the foreigner still abounds. Foreigners in Korea are issued identity cards with five or six digit numbers, whereas locals hold cards with 13 digits. As a result, foreigners’ cards cannot be used for some online transactions.

Foreigners also have to wait at least three months to open a bank account and then another three to use an Automated Teller Machine. Even mobile phones are restricted to one per foreigner. One telephone company even goes as far as to not allow foreigners to sign up for its mobile phone service. “So, while the government advocates a welcoming attitude towards foreigners, more work needs to be done to make that attitude reach down to the level of everyday matters,” the authors wrote.

Steel mills and Ponies

The Korean story is incomplete without remarkable accounts of how its domestic enterprises had been built as well as the feats of engineering and infrastructural projects. When General Park Chung Hee was elected Korea’s president in 1963, he had a dream: Build the steel industry then the road system, then the cars. Naysayers back then said Korea would never be more than a farming economy. They were, of course, proven wrong – many times over.

Park Tae-Joon, an army contemporary of President Park, who had no experience or expertise in steelmaking, took on the challenge and built Korea’s first steel-producing company. In 1973, the first steel sheets rolled out from the furnaces of the Pohang Iron and Steel Company (POSCO). Park and his employees “learned it all from others, while making many visits to Japanese steel plants, which at that time were considered among the world’s best”. By 1992, its factories produced almost 21 million tonnes of crude steel yearly. The company was listed on the New York Stock Exchange two years later. “The company’s plants are considered among the most efficient and modern in the world and can produce steel at US$100 less per tonne than the largest US steel firms,” the authors noted.

Next was the Kyungbu Expressway that runs from Busan to Seoul. Farmer-turned-auto mechanic Chung Ju-Yung’s construction company, Hyundai, won the government contract at a ridiculously low bid of US$649 million (others placed bids as high as US$1.4 billion). More amazingly, Hyundai finished building the tunnel and Highway 1 within two years and four months. And so, the dream was soon to be complete.

Wanting to move beyond being a subcontractor for American car brands, Chung and President Park set their sights on building a real Korean car company. Chung took the hard route, building the company from scratch – with designers from Italy, and a British car executive overseeing the factory’s construction. The “Pony”, became the first Hyundai car to roll off the assembly line in 1976, and this compact family vehicle soon became “the most common car on the Kyungbu Expressway”.

From then on, there was no stopping Chung. He exported the Pony to 30 countries simultaneously (again defying recommendations by his advisers) and launched a “Cars That Make Sense” marketing campaign in North America in 1986. By the following year, some 300,000 cars had been sold in the US, Canada and Mexico. In 2009, Hyundai won the coveted North American Car of the Year award with its Hyundai Genesis, a relative cheap US$40,000 entrant in the lucrative luxury car market.

Soon after, other brand success stories followed. LG, the former Lucky-Goldstar, transformed itself from a manufacturer of unknown cheap commodity goods into “one of the world’s most valuable brands”, surpassing, in 2008, Sony Ericsson (a Japan-Swedish joint venture) as the fourth-largest mobile phone maker in the world. Samsung, a mere “parts supplier” in the electronics industry until as recent as the 1980s, has become the South Korean giant in areas like mobile phones, consumer electronics and semiconductors. The Samsung Group, which is also in construction, ship-building and other key industries, accounts for around 20% of the country’s exports.

Korea, declared Myung and Jaffe, is now recognised as the industrial giant that it had “somehow willed itself to become”, earning its place as one of the four Asian economic “tigers” alongside Hong Kong, Taiwan and Singapore.

Towards Korea 3.0

As the country move towards a new era from its Asian tiger years, some questions are raised: will it continue to stay hungry for progress, wean itself off its high dependence on fossil fuels, improve on its weak environmental record, open up its closed social systems and navigate the choppy waters of volatile relations with the North?

If it can, then it is the authors’ view that the nation can stand alongside the most advanced countries in the world. And rightly so, as it has repeatedly proven that it can compete with the best and the brightest through “sheer will power, hard work, and an emphasis on education and setting ambitious goals.”

What remains is for the former Hermit Kingdom to crawl out of its shell and share its story more effectively with outsiders. “The tools that made Korea 2.0 successful will not necessarily work for Korea 3.0,” Myung and Jaffe concluded. “A centrally planned economy is not the answer to future growth, and neither is a rigid networking and communication system. It is time to shed the Hermit Kingdom label once and for all, and to show the world all that Korea has to offer.”
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